[Code of Federal Regulations]
[Title 12, Volume 3, Parts 220 to 299]
[Revised as of January 1, 2001]
From the U.S. Government Printing Office via GPO Access
[CITE: 12CFR225.83]

[Page 110-111]
 
                       TITLE 12--BANKS AND BANKING
 
                   CHAPTER II--FEDERAL RESERVE SYSTEM
 
PART 225--BANK HOLDING COMPANIES AND CHANGE IN BANK CONTROL (REGULATION Y)--Table of Contents
 
                 Subpart I--Financial Holding Companies
 
Sec. 225.83  What are the consequences of failing to continue to meet applicable capital and management requirements?

    (a) Notice by the Board. If the Board finds that any depository 
institution controlled by a financial holding company ceases to be well 
capitalized or well managed, the Board will notify the company in 
writing that it is not in compliance with the applicable requirement(s) 
for a financial holding company and identify the areas of noncompliance.
    (b) Notification by a financial holding company required. Promptly 
upon becoming aware that any depository institution controlled by the 
financial holding company has ceased to be well capitalized or well 
managed, the company must notify the Board and identify the depository 
institution involved and the area of noncompliance.
    (c) Execution of agreement acceptable to the Board--(1) Agreement 
required; time period. Within 45 days after receiving a notice under 
paragraph (a) of this section, the company must execute an agreement 
acceptable to the Board to comply with all applicable capital and 
management requirements.
    (2) Extension of time for executing agreement. Upon request by a 
company, the Board may extend the 45-day period under paragraph (c)(1) 
of this section if the Board determines that granting additional time is 
appropriate under the circumstances. A request by a company for 
additional time must include an explanation of why an extension is 
necessary.
    (3) Agreement requirements. An agreement required by paragraph 
(c)(1) of this section to correct a capital or management deficiency 
must:
    (i) Explain the specific actions that the company will take to 
correct all areas of noncompliance;
    (ii) Provide a schedule within which each action will be taken;
    (iii) Provide any other information that the Board may require; and
    (iv) Be acceptable to the Board.
    (d) Limitations during period of noncompliance. Until the Board 
determines that a company has corrected the conditions described in a 
notice under paragraph (a) of this section:
    (1) The Board may impose any limitations or conditions on the 
conduct or activities of the company or any of its affiliates as the 
Board finds to be appropriate and consistent with the purposes of the 
Bank Holding Company Act; and
    (2) The company and its affiliates may not engage in any additional 
activity or acquire control or shares of any company under section 4(k) 
of the Bank Holding Company Act without prior approval from the Board.

[[Page 111]]

    (e) Consequences of failure to correct conditions within 180 days--
(1) Divestiture of depository institutions. If a company does not 
correct the conditions described in a notice under paragraph (a) of this 
section within 180 days of receipt of the notice or such additional time 
as the Board may permit, the Board may order the company to divest 
ownership or control of any depository institution owned or controlled 
by the company. Such divestiture must be done in accordance with the 
terms and conditions established by the Board.
    (2) Alternative method of complying with a divestiture order. A 
company may comply with an order issued under paragraph (e)(1) of this 
section by ceasing to engage (both directly and through any subsidiary 
that is not a depository institution or a subsidiary of a depository 
institution) in all activities that are not permissible for a bank 
holding company to conduct under section 4(c)(8) of the Bank Holding 
Company Act. The termination of activities must be done within the time 
period referred to in paragraph (e)(1) of this section and subject to 
terms and conditions acceptable to the Board.
    (f) Consultation with other agencies. In taking any action under 
this section, the Board will consult with the relevant Federal and state 
regulatory authorities.